Many years ago, I described a scene I had noted as a secondary school student in my village market. In the piece which was published in the Harvard Business Review, I explained how market women gathered around a truck, pooling resources together to get big discounts on foodstuffs by buying in bulk. In China, someone has reduced the friction of that congregation with an app, making it easier for people to come together to buy things at scale for huge discounts. The platform is one of the most fascinating apps in the world right now. The app is called Pinduoduo.
The women had gathered where the market’s largest sugar distributor was giving generous bulk discounts. It was a typical African open market, where people bring their goods for sale and afterwards take the remainders home. Late in the evening, the distributor observed that one of his trucks had broken down. He couldn’t bring everything home. He quickly started a promotion with even deeper discounts on bulk purchases.
Yes, the most important (emerging) social media company in the world now is Pinduoduo. It is an amazing ecommerce solution platform which is possibly going to lead into the new phase of social media ecommerce where the “social” makes sense. It allows users to participate in group buying deals in ways that they do not over-think and over-plan it.
Pinduoduo is disrupting markets and growing fast in China where it was invented. Its model is exciting: you want to buy 10 cups of rice. Certainly, a bag of rice offers deep discount over just buying the 10 cups. To get that discount, you put a bag of rice in your wish list, and then invite friends to take a look. Once you have gotten the number of people that would enable you buy a bag of rice, you have a deal. And then you would go and buy that bag of rice and everyone will share. At the end, because of the volume discount, you might have saved up to 90% on the 10 cups of rice.
Pinduoduo is less than three years old but it already has more than 300 million users. It is ranked the #2 most popular ecommerce app in China (behind Taobao). The app has a valuation of $15 billion and has raised nearly $2 billion.
Pinduoduo’s model, which combines low prices with group discounts that users can lock in by rounding up their friends on social media, has seen it quickly rise to the ranks of China’s top ecommerce companies, threatening ecommerce titans like JD.com and Alibaba…
The app allows customers to lock in low-price deals by rounding up a certain number of their friends to purchase the same item…
In this way, consumers can use WeChat to access Pinduoduo, and also to share product links with their friends, locking in deals and spreading the word about the app at the same time. These deals can involve discounts of up to 90%, as well as cashback incentives and even free products for loyal customers.
This is not Groupon because this is driven by customers and not retailers and merchants. You do not need to get a retailer to reduce the cost of the rice to enable you buy the 10 cups of rice on the premise that many more would come to buy-off the bag of rice within a time-window. Rather, driven by the users/buyers, you approach the retailer and pay for what is currently paid for a bag of rice. Unlike Groupon, you do not need many people to commit before the deal can be activated by a retailer.
Groupon’s vouchers required much larger numbers of people to sign up to each deal, forcing its users to wait around for strangers to join their group, and giving them limited control over the whole process….
Unlike Pinduoduo, Groupon also wasn’t an ecommerce vendor in its own right, but instead relied on retailers and restaurants to propose and agree to the discounts it offered on their behalf. This meant it had to lower the risk for businesses participating in its service, adding an extra layer of friction. All of these factors caused Groupon to later abandon the ‘group discount’ model in favour of a marketplace format.
I do think this app can be cloned in Nigeria. There is a market need for it. Yes, with the availability of smartphone, someone can make an app that resembles Pinduoduo in Nigeria. We have the same market friction as Chinese: we want to save and get good deals at scale. A WhatsApp integration would have been more optimal since it works at phone level (you can chat and call easily on a phone that rings) over say Facebook or Messenger.
1. Advance your career with Tekedia Mini-MBA (Sept 13 – Dec 6, 2021): 140 global faculty, online, self-paced, $140 (or N50,000 naira). Click and register here.
2. Click to join Tekedia Capital Syndicate and own a piece of Africa’s finest startups with a minimum of $10,000 investment.